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Should Your Poly Family Start an LLC?

Recent polls show that nearly 5% of American adults have been or are currently involved in a polyamorous relationship. However, the questions remains, how can people involved in plural relationships protect assets and obtain legal benefits similar to those of married couples? Some poly families are forming LLCs in order to protect family assets and divide property upon death or divorce. But since LLC laws weren’t written with poly families in mind, it’s hard to say to what extent these laws will protect polyamorous households. Here’s what you need to know about starting an LLC as a poly family.

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Does Forming an LLC Protect Poly Families?

Sometimes, but it’s complicated. Unfortunately, starting an LLC won’t grant a poly family the exact same rights as legally married couples. For example, an LLC can’t grant a partner hospital visitation rights should one of their partners fall ill. Since LLC laws were not designed for polyamorous families, whether they can be used to grant rights to poly families may depend on how individual states interpret the laws. What’s more, LLCs can be expensive to form and maintain. If you’re thinking of starting an LLC with your poly partners, it’s a good idea to consult a lawyer about the best way to go about it. That being said, there are some potential benefits for polyamorous families that form an LLC, which we go into below.

LLC Benefits for Polyamorous Families

It’s no secret that marriage comes with all sorts of legal benefits like reduced inheritance taxes, joint tax filings, and division of marital assets if the marriage dissolves. Because poly relationships are not legally recognized at the state or federal level, none of these benefits are available to people in polyamorous unions. In order to protect their assets and obtain legal recognition for their relationships, some poly families have started forming LLCs.

While LLCs are primarily used by business owners to protect their personal assets (home, savings, investments) from lawsuits or bankruptcy, the flexible nature of the LLC can allow polyamorous partners to hold common assets like a car or a house, pass on assets in the event of death, and in some cases even buy into a shared health-insurance plan (only if the LLC is used to do business).

Here are some situations in which poly families may be able to use an LLC to their advantage.

1. Buying and Maintaining a Home

No matter what kind of relationship you’re in, buying a home together is a big step. For most people, their home is their most valuable asset. But what’s a poly family to do when home buying is generally built around the concept of a two-person household? The answer might be to buy a house with an LLC.

The main benefit of purchasing a home with an LLC is that if by some chance one of the members in the relationship gets sued, the LLC would shield the house and the family assets from being used to satisfy a judgment. What’s more, the LLC’s operating agreement can be written to reflect how much of the house each adult family member owns. This makes it easier to navigate how much money each person needs to pay to maintain the home, or what each person is owed if they sell the home.

2. Purchasing a Vehicle

Buying a car with an LLC can make sense for some poly families. If a vehicle is owned by the LLC, the personal assets of the LLC’s members are generally protected from any claims or lawsuits. If a poly family of four buys a car under an LLC, but only three drive the car, the operating agreement can exclude the non-driving member from having to pay to maintain the vehicle.

3. Ending the Relationship

Unmarried partners generally have no legal responsibility for each other in the event of a breakup. This means the rules that apply in a divorce (splitting family assets), don’t apply if you’re not married. But a polyamorous family with an LLC can plan for all possible scenarios, including a breakup. Since each partner in the relationship is also a member of the LLC, the members would simply follow their own LLC’s rules to remove a member. If all partners decided to leave the relationship, each member would follow the rules to dissolve the LLC.

4. Death of a Partner

No one likes to think about it, but death is inevitable. For a married couple, this generally means that the surviving spouse is entitled to all or some of their partner’s assets, unless a will, trust, or other legal document states otherwise. A non-married partner, or partners, are not legally entitled to assets not co-titled in their name. However, if the assets of the partners are held in an LLC, the surviving members of the LLC can follow the rules they’ve drawn up following an LLC member’s death.

5. Passing Assets to Family Members

LLCs not only protect family assets, but they can also be used to pass down family property and wealth at reduced tax rates. LLC members can transfer almost any asset (bank accounts, property, stocks, etc…) into the LLC. The LLC can in turn pass those assets to other LLC members and their children in the form of a gift. For 2024, any gift with a value of $18,000 can be handed off to an LLC member without the member having to pay income taxes on that gift. Over time, whole estates can be transferred from one LLC member to the others, essentially tax free.

LLC Operating Agreement for Poly Families

An LLC’s operating agreement acts as the blueprint for how the LLC will be organized and run. For poly families that choose to form an LLC, their multi-member operating agreement will probably be their single most important document. An LLC’s operating agreement acts as a contract between the members, who agree to abide by the rules set out in the document. Operating agreements are not required by law in all states, but without one, the LLC will be governed by default LLC laws, which may not protect the polyamorous relationship to the extent the members had wished.

What should a polyamorous family include in their LLC operating agreement?

Like LLCs, operating agreements are flexible. Almost anything the members want to include in the agreement can be added, or changed (as long as the members agree). Here are the most important subjects all polyamorous relationship operating agreements should cover:

  • Initial investments (who owns what)
  • Voting rights and decision-making powers
  • Rules for transferring LLC property
  • How to remove a member
  • Rules for handling dissolution of the LLC

*This is informational commentary, not advice. This information is intended strictly for informational purposes and does not constitute legal advice or a substitute for legal counsel. This information is not intended to create, nor does your receipt, viewing, or use of it constitute, an attorney-client relationship. More information is available in our Terms of Service.

This entry was posted in Opinion.